Intellectual property is a highly valuable asset for many companies, particularly in technology-related industries. Intellectual property rights protect a company's investment in its products, ideas, name, and reputation, and help maintain competitive advantage. Intellectual property can be developed internally or acquired from third parties. For example, a company may secure intellectual property rights in technology developed by its employees, or obtain access to technology developed by third parties through the purchase or license of intellectual property rights. At the same, a company may seek to generate added revenue by selling or licensing its intellectual property rights to third parties. In each case, the purchaser or licensee seeks to enhance its competitive advantages, whereas the seller or licensor seeks to increase revenue.
Transfer to a third party can be especially attractive when a company has not commercialized a particular technology and the applicable intellectual property rights provide little blocking protection. Finding a purchaser or licensee can be difficult, however, and often requires extensive research. Once a potential purchaser or licensee is finally identified, the process for negotiating the transfer terms can be protracted. Moreover, the time and resources necessary to both identify an opportunity and close the deal can cut into ultimate revenues. Legal services, in particular, represent a substantial cost that can substantially impact the bottom line. Also, a licensing consultant often demands a percentage of revenues in consideration of efforts in finding a purchaser or licensee.
A company seeking to acquire intellectual property rights faces similar problems. The uncertain cost of transfer, in particular, may create a barrier to discussions. Often, calculation of the appropriate amount is speculative. In addition, it can be difficult to determine whether the intellectual property owner has any interest in selling its rights or granting licenses. A company also may be hesitant to approach an intellectual property owner when infringement is a concern. In particular, the company may not want to “tip off” the owner of the intellectual property rights, and thereby invite an infringement suit. Once an opportunity is identified, the company seeking rights must engage in due diligence analysis for valuation. In the end, infringement concerns, uncertainties, and expenditures of both time and resources can prevent a transfer that could be beneficial to both parties.
The market for intellectual property rights also includes a small, but growing group of intellectual property investors. Intellectual property investors seek out new technologies and applicable intellectual property rights, either for product commercialization or exploitation by sale, licensing, or litigation. Intellectual property investors do not typically have infringement concerns, but are subject to some of the same problems faced by intellectual property owners and companies seeking transfer. Specifically, investors must expend substantial time and resources in the identification of opportunities. Without knowledge of an owner's posture for or against transfer, for example, the investor can pursue many leads that result in dead ends. Once the owner expresses an interest, it may be difficult to establish a market value for the intellectual property rights. Again, extensive due diligence analysis usually is necessary.
With the many barriers described above, companies can easily miss opportunities to maximize revenue or enhance competitive advantage through intellectual property transfer. Intellectual property rights often are left to languish and expire while the technology goes uncommercialized. Usually, the root cause is a lack of information.